The Congress on Wednesday asked the Reserve Bank of India whether the government piled pressure on the central bank to create provisions for helping defaulters and fraudsters, flagging a framework made public by the RBI last week.

Congress communications chief Jairam Ramesh issued a statement saying that “the Prime Minister has always eagerly bent or changed rules to help his friends in a few large business groups” and referred to the 100 questions the party had posed to Narendra Modi on the Adani group.

Against the larger backdrop of alleged crony capitalism, Ramesh moved on tothe separate issue that cropped up last week andapparently related to other perceived “friends” of the Prime Minister: “The RBI must reveal if there was any pressure from the Modi government to issue these instructions.”

The instructions the Congress leader was referring to was the creation of a special window for those who ran away after looting India’s banks by allowing mutual settlements.

Describing it as “clean chit” to all wilful defaulters and frauds who have runaway with public money, Ramesh said: “On June 8, 2023, the RBI issued instructions under a ‘Framework for Compromise Settlements and Technical Write-offs’ that allowed banks and other financial entities to ‘undertake compromise settlements or technical write-offs in respect of accounts categorised as wilful defaulters or fraud without prejudice to the criminal proceeding underway against such debtors’. These accounts will be permitted to take fresh loans after a 12-month ‘cooling period’.”

Describing it as “clean chit” to all wilful defaulters and frauds who have run away with public money, Ramesh said: “On June 8, 2023, the RBI issued instructions under a ‘Framework for Compromise Settlements and Technical Write-offs’ that allowed banks and other financial entities to ‘undertake compromise settlements or technical write-offs in respect of accounts categorised as wilful defaulters or fraud without prejudice to the criminal proceeding underway against such debtors’. These accounts will be permitted to take fresh loans after a 12-month ‘cooling period’.”

Ramesh said: “The RBI must immediately repeal its instructions and prevent banks from settling with wilful defaulters and fraudsters. The RBI also must clarify why it thought these instructions were necessary at this time, despite its repeated warnings and instructions to the contrary.”

The All India Bank Officers’ Confederation and the All India Bank Employees Association, which represent six lakh bank employees, have opposed this policy.

Ramesh recalled that they point out that “it will not only lead to erosion of public trust in the banking sector but also undermine the confidence of depositors”. They also warn that “such leniency serves to perpetuate a culture of non-compliance and moral hazard, leaving banks and their employees bearing the brunt of the losses”.

Ramesh added: “The RBI knows well the dangers of its move. Two years ago, it had clearly stated that wilful defaulters would not be allowed to access capital markets or take fresh loans. As recently as May 29, 2023, the RBI governor warned about the many ways in which defaulters and fraudsters conceal the true status of distressed loans. Will the RBI clarify if the Modi government has pressurised it to take this U-turn?”

The statement issued by him explained: “Indians have paid a high price for fraud and wilful defaults. Banks wrote off loans worth Rs 10 lakh crore between 2017-18 and 2021-22. The recovery rate for these loans is an abysmal 13 per cent, which means that only Re 1 is being recovered out of every Rs 8 written off. The top 50 wilful defaulters, a list headed by Modi’s friend Mehul Choksi, owe a substantial Rs 92,570 crore (as on March 31, 2022). Banking frauds have risen 17-fold under the Modi government, from Rs 34,993 crore in 2005-14 to Rs 5.89 lakh crore in 2015-23.”

He added: “Honest borrowers — farmers, small and medium enterprises, and middle-class salaried workers — are groaning under relentless EMIs. They are never given a chance to renegotiate their loans. Yet the Modi government has now provided fraudsters and wilful defaulters such as Nirav Modi, Mehul Choksi and Vijay Mallya a path to rehabilitation. While wealthy financiers of the BJP are given every undeserved convenience, honest Indians struggle to pay their loans. This reveals the true nature of this suit-boot-loot-jhoot sarkar.”